The Influence of Ownership Structure on the Firms Dividend Policy Based Lintner Model

Norhasniza Mohd Hasan Abdullah · Zuraidah Ahmad · Shashazrina Roslan

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Corporate Finance and Governance Auditing, Earnings Management, Governance Financial Analysis and Corporate Governance

Abstract

This study investigates the relationship between types of ownership structure and dividend payments of Malaysian listed companies. A crosssectional analysis of 100 sample firms listed on the main board of Bursa Malaysia for the years 2010 is utilized. The study examines the explanatory power of two alternative models of dividend policy, the full adjustment model and the partial adjustment model modified which are moderated by the possible effects of five types of ownership structure, namely ownership concentration, ownership dispersion, institutional ownership, managerial ownership and foreign ownership. Only ownership concentration variable are found to be positively and statistically significant in influencing dividends in both type of dividend model. The finding is consistent with agency theory since high dividend payments can be used for mitigating agency conflict as dividends can be substituted for shareholder monitoring. Further, the empirical results reveal that the partial adjustment model is better in compared to the full adjustment model in explaining the variation in dividends with variables associated with ownership classes.

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References

1976Theory of the firm: Managerial behavior, agency costs and ownership structure 1961Dividend Policy, Growth, and the Valuation of Shares 1956DISTRIBUTION OF INCOMES OF CORPORATIONS AMONG DIVIDENDS, RETAINED EARNINGS AND TAXES 1998Agency Problems and Dividend Policies Around the World 1984Two Agency-Cost Explanations of Dividends 2000Agency Costs and Ownership Structure 1982GROWTH, BETA AND AGENCY COSTS AS DETERMINANTS OF DIVIDEND PAYOUT RATIOS 1976The Dividend Puzzle

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